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    Conducting Mid Year Budgeting and Spending Reviews

    If your midyear review revealed that things aren’t quite what you expected, don’t fret. This is a learning opportunity and there is solace in knowing what’s happening with your finances, even if it’s not what you expected. Use your learnings to pivot and decide how to best improve over the remaining months.

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    Ideally, midyear budget and spending reviews are part of a more frequent financial review cycle to ensure dollars are spent strategically and school districts are not over or underspending at the end of the year. Unfortunately, many school districts fail to conduct regular financial reviews because the process is often time consuming. This doesn’t have to be the case. With the recommendations outlined below, districts can glean high level insights that can make a significant difference now and work their way to deeper insights over time.

    A common midyear review method is using a source and pace analysis to gain a quick sense of financial performance for your schools and departments.

     

    Source and Pace Analysis

     

    The Source and Pace analysis looks at the pace of spending across selected funding sources to gauge whether a school or department is at risk of overspending or underspending at the end of the year.

    Simply put, pace is:

    • a comparison of the percentage of budget remaining versus the percentage of the fiscal year remaining, and

    • an assessment of whether the school or department is spending too fast, too slow, or on track.

     

    Setting the Pace

     

    When setting the pace, first identify the funding sources to be reviewed and the budgeted and remaining funds associated with those funding sources.

     

    Once the sources and cutoff dates are identified, calculate the percentage of the year remaining for each source. Keep in mind that spending deadlines can vary for different funding sources, and some schools may have different spending cutoffs than schools who will be out for the summer months. Be sure to factor in these circumstances when calculating the percentage of the year remaining for your district or school.

     

    Adjusting the Pace

     

    When calculating the pace or percentage remaining in the fiscal year, it’s important to consider historical spending trends. These trends will allow you to better anticipate any upcoming spikes or lulls that may appear in the second half of the year and provide you an opportunity to adjust your spending accordingly.

     

    In the chart for a sample district below, notice the large spike in spending that occurs during the spring months, likely as budget owners rush to spend down funds before the end of the fiscal year. If you notice such a trend within your district, ask yourself, “Was this a planned event? Is this the result of an unexpected expense, like a piece of equipment breaking, or just a change of priorities over the course of the year? Was something allocated in the wrong expense category? What was not accounted for?”

     

    Taking the time to reflect on and adjust your spending pace midyear can greatly reduce the stress and anxiety many districts experience at the end of the year or when unexpected expenses occur.

     

    Evaluating the Pace

     

    Once the pace is calculated it’s time to see how school and department actual spending and remaining budget compares to the pace.

     

    We generally use three broad categories to describe the pace:

    • On track indicates a school’s remaining budget is within 5-10% of the percentage remaining in the fiscal year. These schools are at low risk for overspending or underspending the budget at the end of the year

    • A slow pace indicates that the school has a higher percentage of budget remaining than the desired pace and could be at risk for underspending at the end of the year

    • A fast pace indicates that the school has a lower percentage of budget remaining than the desired pace and could be at risk for overspending at the end of the year

     

    It’s important to remember that a source and pace analysis is not a forecast and should not substitute actual conversations that should be had regarding the pace of spending. Such conversations are critical components of a midyear budget review process to fully understand spending plans and make any necessary adjustments.

     

    If your midyear review revealed that things aren’t quite what you expected, don’t fret. This is a learning opportunity and there is solace in knowing what’s happening with your finances, even if it’s not what you expected. Use your learnings to pivot and decide how to best improve over the remaining months.

     

    If your midyear review revealed that you’re doing better than expected, use this as an impetus to improve your healthful spending patterns.
    Allovue
    ABOUT THE AUTHOR

    Allovue works with districts and state departments of education across the country to allocate, budget, and manage spending. Allovue's software suite integrates seamlessly with existing accounting systems to make sure every dollar works for every student. Allovue also provides additional services such as chart of accounts and funding formula revisions.

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